Stocks

Stocks surge on buzz of next round of sops for markets

Shishir Sinha New Delhi | Updated on October 29, 2019 Published on October 29, 2019

Govt looking at aligning LTCG, DDT, STT into one tax for easier compliance

The new trading year — Samvat 2076 — began on Diwali day on a positive note and the sparkle continued on Day 2 with news of the Centre considering a package of sops for the stock market.

These sops, highly placed government sources told BusinessLine, include aligning the various taxes on equity such as the Long-Term Capital Gain (LTCG), the Dividend Distribution Tax (DDT) and the Securities Transaction Tax (STT)

Though the Union Budget is just three months away, the possibility of announcing new measures ahead of the exercise cannot be ruled out, the sources said. The Budget for 2020-21 is likely to be presented on February 3.

 

 

The broad thinking behind the measures is to have just one tax so as to make compliance easy. Also, ways to do away with dampeners such as the LTCG and the DDT are being explored.

The sources said the Prime Minister’s Office held meetings with Finance Ministry officials and proposals are being finalised.

News about such a move led to a fresh round of heavy buying on the first full trading session of Samvat 2076, the Hindu calendar year. The key indices BSE Sensex and the NSE Nifty moved up in today’s session and ended with gains of nearly 582 points and 160 points, respectively.

The LTCG levy was brought back in the 2018-19 Budget after 14 years. Under LTCG, a 10 per cent tax is levied on gains of more than ₹1 lakh realised from share sales. Long-term is defined as shares sold after 365 days of holding.

Pain points

The reintroduction of this tax did not go down well with investors.

There has also been demand to abolish LTCG on the ground that the STT is levied on buying and selling of shares.

Another dampener for investors, especially the big ones, is the DDT and the government thinking is to do away with it. As of now, dividends from corporates or mutual funds attract a 10 per cent DDT. While companies pay dividend from their profits, it is tax-free in the hands of investors up to ₹10 lakh. Investors receiving dividends of more than ₹10 lakh per annum need to pay 10 per cent DDT.

“The effort is to attract investments from Global Pension Funds, Sovereign Funds and Insurance Funds,” a source said. Investments from these funds are usually for the long term and help not just in providing stability to the stock and currency markets, but also in meeting the capital requirements of the manufacturing sector.

With the GDP growth rate slipping to a low of 5 per cent and with the slump in consumption and investment demand, the Modi government has initiated a slew of measures since August 23.

The measures taken so far to kick-start the economy include rolling back of enhanced surcharge on domestic and foreign investors, merging 10 PSU banks into four and cutting the corporate tax rate to 22 per cent from 30 per cent.

Published on October 29, 2019
This article is closed for comments.
Please Email the Editor